1. S & P 500 Financials Sector Stock Recommendations 8/11/2009 Jerod Tilton Jon Verworn Zachary Wang

2. Agenda Recap of Sector Presentation Current Valuation JPMorgan Chase (JPM) Hudson City Bankcorp (HCBK) Wells Fargo (WFC) Visa (V) Recommendation Recap Questions 8/11/20092S & P 500 Financials Sector Stock Recommendations

3. Sector Recap – As Presented (7/14/09) Financial Sector Underweight Relative to S&P 500 by 4.4% – 4.0% excl cash 8/11/20093S & P 500 Financials Sector Stock Recommendations

4. Sector Recap – Current (7/31/09) Financial Sector Underweight Relative to S&P 500 by 4.93% – 4.61% excl cash &dividends SIM portfolio not performing up to S&P 500 8/11/20094S & P 500 Financials Sector Stock Recommendations

5. Potential Causes for Downside More Bank Failures Deeper Recession – e.g. Double-dip Recession Low Investor Confidence Federal Funds Rate Increase Increased Regulation Credit Card Defaults Due to unemployment Lack of Dividends Toxic Assets 8/11/20095S & P 500 Financials Sector Stock Recommendations

6. Potential Causes for Upsides Systemic recovery—high beta Less competition for those left = more market share Potential privatization of Social Security savings Increased savings trends Purging of toxic assets 8/11/20096S & P 500 Financials Sector Stock Recommendations

7. Sector Recommendation Keep financials services underweight In the short term, returns will poor. Financial services will not out perform the market, however, once the credit crisis and other issues are resolved, then returns will increase Currently risk outweighs reward. We feel that a systemic rebound can be experienced in other sectors without as much risk. We are bullish long term, however for the short term, we are bearish. We recommend leaving the financial services at 440 basis points underweight 8/11/20097S & P 500 Financials Sector Stock Recommendations

8. Current Valuation Current upside for stocks 8/11/2009S & P 500 Financials Sector Stock Recommendations8

9. Stock Performance 8/11/2009S & P 500 Financials Sector Stock Recommendations9 Two year stock performance of the SIM financial stocks in addition to Visa (Black) and the S&P 500 Financial Sector Index (Purple)

10. JPM Info Pro’s – Jamie Dimon can do no wrong on Wall Street – Washington Mutual conversion complete by EOY – Repaid TARP funds – New organic growth opportunities Con’s – Jamie Dimon can do no wrong on Wall Street – Total insured Share 9.2% Growth by acquisition limited – Decreases dividend from $0.35 to $0.05 8/11/2009S & P 500 Financials Sector Stock Recommendations10

11. JPM Data Has outperformed the S&P 500 financial sector for almost the last two years Peak in late 2008 due to WaMu aquisition 8/11/2009S & P 500 Financials Sector Stock Recommendations11

12. JPM Data Cont’d JPM Price is passing two year median. – Is it close to maxing out? 8/11/2009S & P 500 Financials Sector Stock Recommendations12

13. JPM Valuation Using combination of DCF & Valuation Model Target Price of $47.84 9 out of 10 analysts assign inline rating or better (yahoo.com) 8/11/2009S & P 500 Financials Sector Stock Recommendations13

14. HCBK Info Pro’s – Did not take TARP – Did not show price swing during week of 8/3/09 – Increased dividend from $0.14 to $0.15 Con’s – In 22 counties, only top five in eight, ranked first in only one – Only beat earnings estimates by $0.01 – 7.69% Tier 1 Capital Rating WFC 9.8%; JPM 9.7% 8/11/2009S & P 500 Financials Sector Stock Recommendations14

15. HCBK Data Has outperformed the S&P 500 financial sector for almost the last two years – Has growth maxed out? 8/11/2009S & P 500 Financials Sector Stock Recommendations15

16. HCBK Data Cont’d Near Two Year Median Price – May be more growth potential 8/11/2009S & P 500 Financials Sector Stock Recommendations16

17. HCBK Valuation Using combination of DCF & Valuation Model Target Price of $16.18 Thompson Mean Price Target $14.67 (yahoo.com) Concensous Hold – Thompson Reuters 8/11/2009S & P 500 Financials Sector Stock Recommendations17

18. WFC Info Pro’s – Continuous restructuring could help nullify some of Wachovia’s toxic assets Con’s – Total insured Share 9.6% Growth by Acquisition Limited – Assets are heavily exposed to Wachovia’s toxic assets – Current price has surpassed the target price 8/11/2009S & P 500 Financials Sector Stock Recommendations18

19. WFC Data Has outperformed the financial sector in the last two years Spike in 2008 due to acquisition of Wachovia – However, toxic assets has declined performance – Recent increase due to restructuring  Wells Fargo Securities 8/11/2009S & P 500 Financials Sector Stock Recommendations19

20. WFC Data Cont’d 8/11/2009S & P 500 Financials Sector Stock Recommendations20 Based on the price history, Wells Fargo is getting close to the 2 year median.

21. WFC Valuation 8/11/2009S & P 500 Financials Sector Stock Recommendations21 Absolute ValuationHighLowMedianCurrent #Your Target Multiple *Your Target E, S, B, etc/Share Your Target Price (F x G) A.B.C.D.E.F.G.H. P/Forward E18.89.313.117.314.501.6023.20 P/S3.60.93.33.13.004.7214.17 P/B3.10.82.61.82.3515.9837.55 P/EBITDA6.712.235.756.446.004.4726.80 P/CF14.35.11011.810.002.4424.37 Average25.22 DCF27.06 Target Price26.14 Equally weighing the DCF and the Valuation Model suggests a target price of $26.14 Current Price of $28.76 (8/7/09) has already surpassed target price - Potential downside of 9.11% to reach target

22. V Info U.S. market share ranked by transaction processor, based on credit card receivables outstanding: 1. Visa -- 46 percent 2. MasterCard -- 36 percent 3. American Express -- 12 percent 4. Discover Card -- 6 percent (Source: Nilson Report, May 2008)VisaMasterCard 8/11/2009S & P 500 Financials Sector Stock Recommendations22

23. V Info Cont’d 2008 worldwide purchase volume by card type Visa credit - 31.7 percent Visa debit - 28.6 percent MC credit - 22.0 percent Amex credit - 10.0 percent MC debit - 6.3 percent JCB credit - 0.9 percent Diners credit 0.4 percent (Source: Nilson Report, May 2009) 8/11/2009S & P 500 Financials Sector Stock Recommendations23

24. V Info Cont’d 2008 global market share for general purpose credit cards (Ranked in terms of purchase volume) Visa - 60.25 percent MasterCard - 28.33 percent American.Express - 10.04 percent JCB - 0.94 percent Diners Club - 0.44 percent (Source: Nilson Report, May 2009) 8/11/2009S & P 500 Financials Sector Stock Recommendations24

25. V Info Cont’d U.S. Visa cardholders alone conduct more than $1 trillion in annual volume. (Source: Visa USA internal statistics, 4th quarter 2006) Consumers carry more than 1 billion Visa cards worldwide. More than 450 million of those cards are in the United States. (Source: Visa USA internal statistics, 4th quarter 2006) There were 984 million bank-issued Visa and MasterCard credit card and debit card accounts in the U.S in 2006. (Sources: Visa USA, MasterCard International) In 2008, 72 percent of consumers indicated they used a debit card in the past year. In 2007, that number was 65 percent. (Source: Javelin, "Credit Card Spending Declines" study, March 2009) 74 percent of monthly college spending is with cash and debit cards. Only 7 percent is with credit cards. (Source: Student Monitor annual financial services study, 2008 8/11/2009S & P 500 Financials Sector Stock Recommendations25

26. V Info Con’t More than 23 billion credit cards transactions were processed in the United States in 2007, and they are projected to grow by 26 percent over the next five years. (Source: Nilson Report) Visa says rewards cards now make up more than half of all credit cards and about 80 percent of money spent on a credit card. (Source: Aite Group, January 2008) Consumers say rewards are the second-most important reason for choosing to apply for a specific card, behind no annual fees and ahead of low interest rates. (Source: Aite Group survey, January 2008) More than one third of consumers choose which card to use in order to maximize card rewards. (Source: ComScore, September 2008) 8/11/2009S & P 500 Financials Sector Stock Recommendations26

27. MA Growth Since IPO

28. V Data Outperformed Mastercard (MA), American Express (AXP), and Discover (DFS) 8/11/2009S & P 500 Financials Sector Stock Recommendations28

29. V Data Cont’d 8/11/2009S & P 500 Financials Sector Stock Recommendations29 Outperformed S & P 500

30. V Data Con’t Above price median since IPO March 2008 8/11/2009S & P 500 Financials Sector Stock Recommendations30

31. V Quantitative 8/11/2009S & P 500 Financials Sector Stock Recommendations31 At a conservative P/E Ratio of 20, expect average annual return of 9%

32. Recommendation Swap Wells Fargo for Visa Equal Weight JPM & HCBK 8/11/2009S & P 500 Financials Sector Stock Recommendations32

33. Financial Sector Questions?? 8/11/200933S & P 500 Financials Sector Stock Recommendations